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Bridging the gap from telco to DSP

Operators are constantly being told that they need to up their game if they want to remain relevant in the digital economy, and fundamentally alter their business model to maintain a foothold in the value chain.

Articles (very like this one!) urge MNOs to become fully-fledged digital service providers (DSPs), while at the same time acknowledging that no one has a game plan for achieving this. Whatever strategy operators ultimately adopt to put themselves at the centre of this emerging ecosystem, becoming a digital telco requires a huge effort and big scale implementation. So, what’s a feasible stepping-stone for getting there?

Taking another look at Sponsored Data

For operators looking to dip their toe into the digital waters, Sponsored Data is a proven business model that can effectively bridge the gap and help to establish the digital service providers (DSP) vision. There is still hesitancy about the validity and scope of Sponsored Data services in the West – perhaps because the most high profile case that we use as a reference point, AT&T, hasn’t set the world alight. But in the East the Sponsored Data model is established – and profitable. Indeed, China’s three biggest operators (China Unicom, China Telecom and China Mobile) all offer Sponsored Data services. Internet giants such as Baidu, Alibaba and Tenecet are all on board –rewarding customers with free data for accessing their marketing campaigns.

We’ve written before about what makes the approach in China successful, essentially that it is designed primarily around an impressive user experience. The roadmap for these operators will most likely involve further data network monetization. But this is a thriving opportunity for operators in the West too. For example, operators can leverage the Sponsored Data model to compete against the likes of Facebook in offering partners a much more attractive mobile marketing channel. This is an emerging practice that is proving successful for operators in China.

Taking on the mighty Facebook

Facebook might have a vast customer base (1.415 billion monthly active users, Statista.com March 2015) but its best Click Through Rate and Install rate are 0.3% and 10% respectively, at a value of $0.44 and $1.3. Operators can enable partners to immediately reach out to millions of subscribers – with a much more competitive partner offer.

With today’s volume pricing, operators can afford to undercut social channels by at least 40% for basic marketing campaigns, with partners only paying up when the end customer actually takes up the offer (according to the campaign specific criteria e.g. completing the download, signing up to the app, etc.). Operators also have a significant advantage over other mobile marketing channels in that they have deeper customer insights and can enable accurate targeting.

“We can foresee a phenomenal impact in the digital value chain as operators compete with major media players, such as Facebook, which have very large customer bases,” says Praewpun Topol, Senior Business Adviser at AsiaInfo. “The fact that three major Chinese operators are having success with this, in collaboration with several high profile Internet companies, would suggest that there is a thriving opportunity to exploit.”

Of course, any business model has to be tailored to suit specific regional demands and local consumer tastes. But the take-away from China is that Sponsored Data can work – and the model can actually challenge mobile marketing services offered by established players, such as Facebook. This is something operators in other markets should take into account as they consider their own digital telco transition.